Milkshape. Export to 3ds. Bring the mesh into DX Studio. RMB on the model and Edit Materials. Add the material file and there it is. If you want to bring in .x files use the DirectX JT toward the bottom of the export list.

3DS Max users we have a wonderful pipeline. In 3DS Max it is File -- export -- .dxmesh and if you have animated models use the Panda .x exporter as the animations will not work with the .dxmesh exporter.